Deemed reliance on disclosure document

A franchisee with a misrepresentation claim meets this term. Under Ontario’s Arthur Wishart Act, s. 7(2), if a disclosure document or statement of material change contains a misrepresentation, a franchisee who acquired a franchise to which it relates shall be deemed to have relied on it. Section 7(3) deems reliance on the information in the disclosure document where the franchisor failed to comply with s. 5 about a statement of material change. See what a disclosure document is.

Where the wording differs

British Columbia’s Franchises Act, s. 7(2), says “conclusively deemed” and makes the rule subject to s. 8(1), under which a person is not liable if they prove the franchisee acquired the franchise with actual knowledge of the misrepresentation or the material change. Alberta’s Franchises Act, s. 9(2), deems reliance on a misrepresentation in a disclosure document, and s. 10(1) removes liability if the person proves the franchisee purchased with knowledge of it. Ontario’s s. 7(4) likewise turns on the franchisee’s knowledge. This entry covers Ontario, British Columbia and Alberta only; check the rules where the business is.

What to ask

• What the buyer knew about the statement before acquiring the franchise
• Which version of the disclosure document, and which later statements, the buyer received

The claim itself is described in statutory right of action for misrepresentation.